Huntington Bancshares Earnings Beat Estimates

On Thursday, Ohio-based regional lender Huntington Bancsharesreported earnings for the three- and 12-month periods ended Dec. 31. Shares in the bank finished the day up by more than 4% after analysts and investors were impressed with the results.

Huntington comes through for investorsFor the quarter, Huntington earned $0.19 per share. This was flat compared to the third quarter, but 36% higher than the same three-month period in 2011. For the year, the bank earned $0.71 per share, a 20% year-over-year increase.

Perhaps most impressive was Huntington's ability to expand its net interest margin by three basis points since the end of the third quarter. A number of the regional lender's competitors have struggled in this regard. Last week, Wells Fargo , the nation's fourth largest bank by assets and largest mortgage lender, reported a 10-basis-point sequential decrease in its NIM, and earlier this week,Â US Bancorp , the nation's largest regional bank, posted a four-basis-point sequential decline. Despite posting record earnings, both institutions suffered as the yield on their earning assets came down following the Federal Reserve's third round of quantitative easing.

Huntington also notched massive gains in terms of credit quality. For the year, its nonaccrual loans dropped by 25% and now stand at 1% of total loans and leases. Additionally, its net charge-off ratio dropped to 0.69%, down from 0.82% in the second quarter -- the third-quarter figure included a relatively large exogenous bump related to new regulatory guidance.

The bank's performance in this regard is worth noting. Like Bank of America , which continues to work through its toxic liabilities associated with the disastrous Countrywide Financial acquisition, Huntington too had a similar, though smaller, imprudent acquisition. Yet, unlike B of A, Huntington has moved on, bringing its credit metrics back to near-normalized levels, while B of A remains mired in the mistakes of former CEO Ken Lewis.

The difference in these banks' fortunes was on display on Thursday, as both banks reported before the bell. Shares of B of A took a beating, falling more than 4%, after it reported a paltry $732 million in quarterly net income due to billions of dollars in charge offs. Alternatively, as I noted at the outset, Huntington's shares shot up by roughly the same degree following its announcement.

Indeed, the only downbeat aspect of Huntington's earnings release concerned the bank's impression on the events in Washington. According to CEO Stephen Steinour: "We expect to continue seeing the strong growth of the Midwest economy relative to the broader United States. However, business sentiment continues to be negatively influenced by the uncertainty in Washington and its direct impact on the U.S. economy."

Huntington's biggest opportunityIn our premium research report on Huntington, I identified growth as the bank's biggest opportunity. I noted that the "post-financial-crisis world has been one of feast or famine in the banking industry. While less adroitly managed lenders ... have retreated to lick their wounds ... others have jumped on this once-in-a-generation opportunity to fill the void left behind. In the regional banking sector in particular, perhaps none is better positioned to exploit these dynamics than Huntington."

Suffice it to say, Huntington's performance last quarter and throughout 2012 didn't disappoint. All around, from loans and deposits to earnings and capital, growth was Huntington's overarching theme over the last 12 months. And, not surprisingly, its share price responded in kind, returning an enviable 24% since the beginning of 2012. The only question now is: How much higher can Huntington fly?